Some Bethlehem City Council members were surprised to learn last week that a prominent city developer was awarded an $800,000 grant out of a tax fund they thought was almost empty.

The same developer is a member of the investment group the Bethlehem Parking Authority is paying $2.1 million to buy land for a new city parking garage.

And it left them wondering: If the city's tax increment financing district fund had $800,000 in it, why wasn't it put toward the cost of a new city parking authority garage planned for the corner of East Third and Polk streets instead of going toward private development?

"That was totally inappropriate and that's the problem. It is like they are playing Monopoly or something. That is not right," Councilwoman Olga Negron said. "I feel like they (the administration) are working for the big developers and not the people and that it is wrong. It was a misuse of money."

Council learned during an Oct. 29 committee meeting that in 2017 Peron Development -- owned by local attorney and developer Michael Perrucci -- was paid $300,000 for its 95-unit luxury apartment building Five10Flats on East Third Street.

The grant was reported as part of the city's new financial incentive reporting program. But the $300,000 disclosed Monday is not the entire allocation.

In 2017, the phased, mixed-use development was actually awarded $800,000 to be paid out over three years after the site's environmental remediation proved more complicated than expected.

"At the time we made the decision to fund Five10Flats, there was no discussion about the garage," Redevelopment Authority Executive Director Tony Hanna said. "I'm not saying it's not a legitimate question to ask, but it is a little late."

Council President Adam Waldron, who was the liaison to the redevelopment authority in 2017, said he was not aware of the award until recently.

"I was surprised by it," he said. "I'm not sure if it was an appropriate use of the TIF. The process of how it was constructed and awarded seems like there are some questions that need to be asked and answered. I don't know the details on why only one applicant applied for it."

Understanding the TIF

The TIF was created in 2000 to spur the redevelopment of the former Bethlehem Steel Corp. plant and helped to fund the Hoover Mason Trestle, visitors center and outdoor plazas on the SteelStacks campus. The special tax fund diverts real estate taxes from the taxing bodies to pay for infrastructure improvements, like roads and sidewalks, to incentivize development.

The Peron grant marks the first time TIF funds were awarded to a taxable, private development. Five10Flats also sits in the City Revitalization and Improvement Zone.

Councilwoman Paige Van Wirt thinks the grant was a misuse of TIF funds.

"The money is there to spur development, not to enhance the private development that is already happening," she said. "It is not like this project was going to stop when it was already underway. It was already being done."

Hanna said he supported the grant because Five10Flats is a $22 million investment in the core of the TIF that's projected to generate $225,000 in annual real estate taxes.

"It was exactly what the TIF was intended to do: site remediation," Hanna said Monday, noting the award was made in a public meeting. "We spent money on some appropriate issues."

Who's benefiting?

Questions surrounding the grant are interwoven with council's questions about the future of parking and economic development incentive benefits in Bethlehem. It's left some on council wondering about who benefits from the deal and if there were better uses for the money.

"I did not think there was money available," Councilman J. William Reynolds said. "I was under the impression from the last couple of years that the parking authority was tasked with coming up with a plan for a Polk Street garage because there was no money left for the RDA to do it."

Reynolds said he learned about the grant for the first time last week, but he'd defer to Mayor Bob Donchez's administration to explain how it happened.

Director of Community and Economic Development Alicia Miller Karner did not return a message seeking comment. Neither did parking authority Executive Director Kevin Livingston or authority solicitor James Broughal.

This 7-story, 585-spot parking garage is planned at East Third and Polk streets in Bethehem. (Courtesy rendering | USA Architects) Sara K. Satullo | For lehighvalleylive.com

Hanna sees the questions about using the grant for Polk Street as a bit of Monday morning quarterbacking.

"Nobody asked me that question," Hanna said. "We made the decision to fund Five10Flats as a standalone discussion. That was never on the table that the parking authority could use another $800,000."

Peron's ties to Bethlehem

Peron is led by Perrucci, who is a partner in the development group that lured Las Vegas Sand Corp. to Bethlehem to open the casino and mall on the former Steel land. Former Bethlehem Mayor John Callahan is director of business development for his law firm Florio, Perrucci, Steinhardt & Cappelli.

Sand BethWorks Retail LLC -- a development group comprised of the Sands, Perrucci and his partners -- owns much of the former Steel land. The TIF was designed to jumpstart redevelopment on that land.

Yet, most of it sits untouched 18 years into the 20-year deal as the casino is being sold to Windcreek Hospitality, the affiliate of an Alabama-based Indian tribe. Once the TIF ends, Five10Flats may prove to be the most significant taxable development within the district outside of the casino.

Bethlehem Area School District Superintendent Joseph Roy said the grant is the sort of win-win the TIF was meant to create. The money helped boost a private project onto the tax rolls, he said.

"With only a few years left on the TIF, I'm encouraged to see the RDA was able to leverage TIF dollars to help spur private development of a taxable property," Roy said in an email.

The parking plight

One of the most sought after properties in the TIF is a modest parking lot at the corner of East Third and Polk streets where city leaders have long envisioned a parking deck anchored by retail.

The plans date back to the Callahan administration when the redevelopment authority was spearheading the project. That authority spent almost $1 million designing and gaining city approval for the almost 600-space deck.

But plans stalled when a ground-lease deal for the property petered out and the authority began to question whether enough new projects would be built in the TIF to support an almost $13.3 million garage. The redevelopment authority and NCC have secured $2.5 million in state grants for the deck.

The redevelopment authority then handed over the project to the parking authority, which finally just inked a $2.1 million agreement to buy the land from Sand BethWorks Retail LLC, the development group that includes the Sands and Perrucci.

At one time, the Sands was supposed to sell the land for $1, Negron said, and now she is learning from meeting minutes that the parking authority bought the land.

"I am very frustrated because they keep making decisions without coming in front of us and then they come to us as if we have no other choice but voting in favor because the parking authority and the city will be in trouble if we don't support it," she said. "It is in the wrong order."

A first spark

Donchez's administration hopes the luxury apartments atop a Starbucks and restaurants represents the first spark of economic resurgence in that stretch of the South Side. The mayor sees the parking garage as the crucial linchpin in that redevelopment, which will hopefully eat up the surrounding vacant parking lots that are all owned by the Sands development group.

Once dubbed Greenway Commons, Five10Flats is an urban infill project on former Bethlehem Steel parking lots, located across the street from the Steel General Office building and Northampton Community College's Fowler Family South Side Center.

Waldron sent a lengthy memo to the parking authority pressing it to provide a long-term plan for how it is going to build a Polk Street deck, repair or replace the Walnut Street garage and maintain its other structures.

"The goals need to be clear, the financing needs to be clear and the idea that this Polk Street garage is the magic bullet that will draw development to East Third street is an antiquated notion," Van Wirt said. "Development is there."

Call for creative thinking

NCC and Lehigh Valley Charter High School for the Arts have committed to lease a total of 265 spaces in the garage. At one time Peron wanted spaces too, but council members said that may be in question now.

Van Wirt is concerned about the authority's ability to pay for another parking deck.

"I don't want to stick my kids with paying for an out-of-date parking garage that is not going to be used," she said.

She'd be in favor of the authority contributing 25 percent of the costs of the garage while its end users contributed more.

"I'd like to see some creative thinking on how the public-private partnership is a lot more private and a lot less public," Van Wirt said.